FISCAL NOTE
Date Requested: February 08, 2016
Time Requested: 02:16 PM |
| Agency: |
Tax Department, State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2566 |
Introduced |
SB554 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to enact the Land Conservation Tax Credit Act of 2016.
According to our interpretation, passage of this bill would create a tax credit equal to 50% of the fair market value of any interest in real property located in West Virginia which is conveyed for the purpose of conservation up to $1 million per donation or gift portion beginning with tax years commencing on or after January 1, 2017. The tax credit may be used to offset personal income tax or corporation net income tax with excess tax credits carried forward for a period not to exceed five years. Alternatively, unused tax credits could be transferred to other taxpayers for their use. The ability to transfer unused tax credits to others should partially limit the amount of any unused tax credit carried over to future tax years. Based on similar programs offered by other states, the projected long-term annual cost of such tax credits may range somewhere between $2 million and $10 million per year.
The bill provides authority for the West Virginia Outdoor Heritage Conservation Fund to award 65% of available tax credits and the West Virginia Agricultural Land Protection Authority to award the remaining 35% of available tax credits.
The provisions of the bill provide that the tax credits will be funded out of available funds in a special revenue account called the Land Conservation Tax Credit Fund and that the amount of tax credits provided each year may not exceed the amount of money in the Land Conservation Tax Credit Fund. The bill fails to address what happens to qualified property interest transfers in a year when there are insufficient revenues in the Land Conservation Tax Credit Fund. Unless the Legislature provides funding for the tax credit program, the initial cap on tax credit awards may be $0 under the provisions of this bill.
Additional administrative costs to the State Tax Department would be $19,250 in FY2018 and thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2016
Increase/Decrease
(use"-") |
2017
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
19,250 |
| Personal Services |
0 |
0 |
10,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
9,250 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would create a tax credit equal to 50% of the fair market value of any interest in real property located in West Virginia which is conveyed for the purpose of conservation up to $1 million per donation or gift portion beginning with tax years commencing on or after January 1, 2017. The tax credit may be used to offset personal income tax or corporation net income tax with excess tax credits carried forward for a period not to exceed five years. Alternatively, unused tax credits could be transferred to other taxpayers for their use. The ability to transfer unused tax credits to others should partially limit the amount of any unused tax credit carried over to future tax years. Based on similar programs offered by other states, the projected long-term annual cost of such tax credits may range somewhere between $2 million and $10 million per year.
The bill provides authority for the West Virginia Outdoor Heritage Conservation Fund to award 65% of available tax credits and the West Virginia Agricultural Land Protection Authority to award the remaining 35% of available tax credits.
The provisions of the bill provide that the tax credits will be funded out of available funds in a special revenue account called the Land Conservation Tax Credit Fund and that the amount of tax credits provided each year may not exceed the amount of money in the Land Conservation Tax Credit Fund. The bill fails to address what happens to qualified property interest transfers in a year when there are insufficient revenues in the Land Conservation Tax Credit Fund. Unless the Legislature provides funding for the tax credit program, the initial cap on tax credit awards may be $0 under the provisions of this bill.
Additional administrative costs to the State Tax Department would be $19,250 in FY2018 and thereafter.
Memorandum
The purpose of this bill is to enact the Land Conservation Tax Credit Act of 2016.
The proposed bill states the credit used may not exceed the amount of Personal Income Tax or Corporation Net Income Tax otherwise due from the taxpayer claiming the credit. However, the bill does not state that the taxpayer must be using the credit against those types of tax types for those limits to apply.
The proposed bill states that if a taxpayer is eligible to receive a tax credit under the terms of this proposed article and there is sufficient money in the Land Conservation Tax Credit Fund, then the Tax Commissioner is to arrange the transfer of the necessary tax credit from the Land Conservation Tax Credit Fund to the eligible taxpayer. This bill does not state what happens if there is insufficient money to pay for the tax credits in this Fund.
The proposed bill is vague in describing what duties the Tax Department would have in administering this tax credit. Further, the bill does state what should happen when the co-owners sell the property for a tax credit and then do not agree on how to apply their tax credit. Also the proposed bill does not make it clear that one sale of a jointly land could not result in two different tax credits being claimed by two different taxpayers.
There is also a serious title defect in this bill. The title simply states that the bill relates to the issuance of tax credits for land conservation. As discussed above, this proposed bill does quite a lot. The bill title fails to mention that the bill contains definitions, an effective date, rule making, reporting requirements, that credit is transferable, that the credit may be carried forward, that the bill creates special revenue account, etc.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov